Landlord and tenant – Service charge – Landlord and Tenant Act 1985 – Appellant landlord not receiving invoice for electricity supplied to block of flats for first five years after building constructed – Appellant then receiving and paying invoice for historic electricity charges – Whether those costs recoverable from lessees of flats through service charge – Whether recovery barred under section 20B of 1985 Act on ground that costs not notified to lessees within 18 months of being incurred – LVT disallowing recovery on ground that costs “incurred” when electricity supplied – Appeal allowed
The respondent held a lease of a flat on terms that provided for the payment of a service charge. The flat was located in one of five blocks on an estate completed by a developer in 2004; the respondent’s lease had been granted in that year and the appellant had then acquired the freehold of the estate in 2005, whereupon it became the respondent’s landlord.
Owing to an oversight, the appellant’s managing agent did not receive invoices from the electricity supplier in respect of one of the two meters in the respondent’s building for almost the whole of the first five years of the building’s occupation from 2004 to 2009. It was then invoiced for those years in October 2009 in the sum of £9,362 and promptly paid that bill. The payment fell into the service charge year ending March 2010; in September 2010, before the annual accounts for that year were prepared, the managing agent notified the lessees that they would be billed in their service charge for the historic electricity charges.
In 2011, the respondent applied to the leasehold valuation tribunal (LVT), under section 27A of the Landlord and Tenant Act 1985, for a determination of his service charge liability so far as it related to the costs of lighting the common parts of his building. He disputed his liability to pay so far as it related to the historic electricity charges. The LVT determined that the appellant was barred from recovering those charges from the lessees in respect of electricity supplied more than 18 months prior to September 2010, since it had not notified the lessees of those costs within 18 months of their being ”incurred” as required by section 20B of the 1985 Act.
The appellant appealed on the ground that the LVT’s decision was inconsistent with the subsequent decisions of the Upper Tribunal and Court of Appeal on section 20B in OM Property Management Ltd v Burr: see [2012] UKUT 2 (LC); [2012] 2 EGLR 35; [2012] 18 EG 104 and [2013] EWCA Civ 479; [2013] EGILR 14 respectively.
Held: The appeal was allowed.
The LVT’s decision was inconsistent with the reasoning of the Court of Appeal in OM Property Management Ltd v Burr that costs were “incurred” only when they were paid, or when an invoice or other demand for payment was submitted by the supplier or service provider, not when services were provided or supplies made. It followed that the charges for electricity supplied between 2004 and 2009 were not incurred, for the purpose of section 20B, until October 2009.
They were not incurred until, at the earliest, the date on which the electricity supplier first delivered its invoices to the appellant’s managing agent: Brent London Borough C v Shulem B Association Ltd [2011] EWHC 1663 (Ch); [2011] 27 EG 77 (CS) distinguished.
The appeal was determined on the written representations of the parties.
Sally Dobson, barrister